The World Bank Central America & Caribbean Catastrophe Risk Insurance Project (P149670) REPORT NO.: RES24605 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CENTRAL AMERICA & CARIBBEAN CATASTROPHE RISK INSURANCE PROJECT APPROVED ON JUNE 30, 2015 TO CCRIF SPC SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE LATIN AMERICA AND CARIBBEAN Regional Vice President: Axel van Trotsenburg Country Director: Yaye Seynabou Sakho Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Anna Wellenstein Task Team Leader: Mirtha Liliana Escobar Saenz, Rashmin Gunasekera The World Bank Central America & Caribbean Catastrophe Risk Insurance Project (P149670) I. BASIC DATA Product Information Project ID Financing Instrument P149670 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 30-Jun-2015 30-Jun-2019 Organizations Borrower Responsible Agency CCRIF SPC CCRIF SPC Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to improve affordability of high quality sovereign catastrophe risk transfer associated with earthquakes and climate-related events for CCRIF Participating Countries. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A5343 25-Jul-2017 14-Aug-2017 31-Oct-2017 30-Jun-2019 23.75 10.28 13.47 TF-A0564 30-Jun-2015 16-Jul-2015 14-Oct-2015 30-Jun-2019 19.50 5.92 13.58 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Central America & Caribbean Catastrophe Risk Insurance Project (P149670) This Restructuring Paper seeks the approval of the Country Director for an extension in the closing date of the Central America and Caribbean Catastrophe Risk Insurance Project (P149670), from June 30, 2019, to December 31, 2019. The project is financed by two trust-funded grants (i) an original grant in an amount of US$19.5 million (TF0A0564), which was approved on June 30, 2015 and declared effective on October 14, 2015; and (ii) an additional financing of US$23.7 million (TF0A5343), which was approved on July 25, 2017 and declared effective on October 31, 2017. The extension of the closing date is necessary to continue with the implementation of activities while allowing for sufficient time to process additional contributions from donors towards the project, namely, US$11 million to finance activities under Components 1 and 2 (expansion to Central America) and US$11 million to implement activities under Component 3 (expansion to the Caribbean). RATIONALE FOR THE EXTENSION: Donor interest in CCRIF SPC remains high, with additional contributions towards the project received from KfW (US$11 million) in November 2019 to support activities in Central America, and from the EU, through the Caribbean Resilience Facility, (US$11 million) in December 2019 to support activities in the Caribbean, including for Overseas Countries and Territories (OCTs). -Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund (Trust Fund No. TF072659, parallel to original Trust Fund No. TF072264): The MDTF to which Germany, through KfW, has made the most recent contribution closes on June 30, 2020. The current donors under the MDTF include (i) the United States, through its Treasury; (ii) Canada, through Global Affairs Canada; (iii) the European Union; and (iv) Germany, through the Federal Ministry of Economic Cooperation and Development. The donors have provided an in-principle agreement to extend the closing date subject to completion of the following conditions: (i) one additional country joins CCRIF SPC and (ii) technical assistance activities are ongoing in at least five of the Central American countries. Given that both conditions were met on June 21, 2019, a donor meeting has been scheduled to extend the End Disbursement Date (EDD) of the MDTF. -Caribbean Regional Resilience Building Facility Single-Donor Trust Fund (TF073227): For the SDTF under which the EU’s contribution is provided, the EDD is currently set for June 30, 2023, PROJECT STATUS The Project Development Objective (PDO) is currently rated moderately satisfactory, with progress achieved in all PDO level indicator and the task team is confident that the PDO will be achieved. There are no outstanding audit reports. -Progress under Components 1 and 2: For the 2019/20 period, Nicaragua renewed its earthquake, tropical cyclone, and excess rainfall policies for the fifth consecutive time. Other COSEFIN countries, including Panama and Guatemala, joined CCRIF SPC by purchasing excess rainfall coverage in 2018 and 2019, respectively. Due to a change in its government, for the 2019/20 period, Panama has requested late entrance and will be purchasing excess rainfall coverage starting August 1, 2019. As for El Salvador, the country has made less progress in moving forward this period but has shown an increased level of interest in participating in training activities provided by CCRIF SPC. As such, El Salvador, Honduras, and Costa Rica remain priority countries for the 2020/21 period. The World Bank Central America & Caribbean Catastrophe Risk Insurance Project (P149670) -Progress under Component 3: For the 2019/20 period, all Caribbean members of CCRIF SPC completed the selection of their CCRIF insurance portfolio, with nine Caribbean governments increasing their level of coverage for at least one of their policies and one country purchasing coverage for an additional peril (tropical cyclone) that it did not have last year. In total, 19 Caribbean member countries have purchased 14 excess rainfall policies, 17 tropical cyclone policies, and 13 earthquake policies. -Payouts since the Project was approved (June 2015): During the implementation of the Project, 27 payouts have been made to 13 countries, totaling approximately US$103.3 million, thereby demonstrating the effectiveness of the instrument to provide countries with liquidity within 14 days of an event. Most payouts were covered by the reinsurance paid with CCRIF SPC, with the remaining amount being reimbursed under the grant (US$0.5 million under Component 1, US$1 million under Component 2, and US$5.5 million under Component 3). -Rainfall model improvement: CCRIF SPC updated its excess rainfall model (XSR 2.1) to improve its exposure, vulnerability, and hazard modules to reduce the basis risk. CCRIF SPC is also working to develop a new model (i.e., SPHERA) to replace the previous model for earthquake and tropical cyclone (i.e., MPRES) starting with the June 1, 2019. Independent technical and actuarial reviews have been financed by the project to ensure the quality of the models. The task team is working closely with CCRIF SPC to review the technical aspects of these consultancies and ensure the timely completion of the activities. Both model improvements are the basis for issuing the 2019/20 policies for all countries. -Drought model development: Following the demand of member countries, a new drought model is being developed and is expected to be available to countries starting in January 2020. The availability of a customized drought product is a significant step forward in the expansion to Central America, as most COSEFIN member countries have indicated a priority interest in this product. -Training and capacity-building activities: To support an informed decision-making process and clarify targeted technical aspects of the models, CCRIF SPC held a minimum of two technical workshops per country with officials from Nicaragua, Guatemala, and Panama in April and May 2019 to (i) provide detailed information on the CCRIF SPC models, (ii) respond to technical issues previously raised by the countries’ specialized technical agencies, and (iii) enhance governments’ understanding of the opportunities and limitations of CCRIF SPC’s models and policies. These workshops were critical in the World Bank’s implementation support to increase CCRIF SPC’s direct engagement with Ministries of Finance and specialized national agencies, improve countries’ understanding of the models and products, and explore alternatives to calibrate the models using country-specific data. To continue supporting the expansion into Central America, the World Bank will work closely with CCRIF SPC to ensure proper coordination and messaging, taking into consideration specific country contexts. CCRIF SPC has taken note of the concerns raised by the technical teams with respect to the change of models for the 2019/20 policy year and remains fully committed to providing products, services, and tools responding to the needs of the Central American countries. This additional support for countries includes exploring options for continuing to integrate country data into the models and improve countries’ risk profiles. PROPOSED CHANGE As discussed with the recipient, it is proposed that the Project closing date be extended from June 30, 2019, to December 31, 2019. This is the Project’s first extension and would allow the task team to discuss with donors the The World Bank Central America & Caribbean Catastrophe Risk Insurance Project (P149670) strategic direction of the MDTF, the engagement in Central American countries, and the appropriate level and mechanisms of the capitalization of CCRIF SPC through additional financing. Donors under the MDTF have also allocated additional Bank-executed funds to allow for the timely implementation of support for the Project over the next 6 months and have allocated additional funding to ensure that the implementation of such support funding is available to the task team during the implementation II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A0564 Effective 30-Jun-2019 31-Dec-2019 30-Apr-2020 TF-A5343 Effective 30-Jun-2019 31-Dec-2019 30-Apr-2020